You could be forgiven if you missed the announcement. The news was tucked into Cisco’s fiscal fourth quarter earnings call. Amidst the perilous rollercoaster-ing of the markets of the past few days, Cisco showed signs of recovering from recent missteps, solidly beating expectations — a performance rewarded by antsy investors with a 17 percent stock price runup.
Almost lost in the din was the news that Cisco is unwinding its investment in the energy management market. Cisco entered this market almost two years ago to the day, with an ambitious announcement of a new product, dubbed Mediator, that would tap into Cisco’s deep networking skills to hook up the many and disparate software networks used to heat, cool, and otherwise operate big commercial buildings.
The precise fate of these business lines remains to be seen, but prospects look dim. At her Cisco blog site, Laura Ipsen, senior vice president of global policy and government affairs, expanded on Cisco’s thinking in a company blog post, although the jargon is tough going. She writes:
“Over the past two years the home and building energy management markets have evolved in such a way that we believe we can provide more value to our customers and the industry by enabling interoperability through our core networking products and solutions (for example, EnergyWise) as part of our integrated architecture within the broader smart grid effort.”
Based on this rationale, it appears that Cisco will likely sell its building management software suite, Mediator. Ipsen writes: “For building energy management, this means we are actively pursuing several strategic options for Cisco’s Network Building Mediator and Mediator Manager product line, with an emphasis on minimizing the impact on current customers, partners and employees.”
The outlook for home energy management systems is less clear — the jargon reaches fever pitch here — but it looks like Cisco is simply going to pull the plug on household offerings, instead focusing on utility and other B2B markets: “For energy management in the home, we will transition our focus from creating premise energy management devices to using the network as the platform for supporting innovative applications and architectures that will improve our customers’ value proposition in the consumer energy management market.”
For close watchers of the smart grid space, the retreat comes as no surprise. At Greentech Media, Michael Kanellos predicted Cisco would retreat last week, pointing out that the company’s earlier success tempted it to overreach into unknown markets, even as its core networking technologies were under intense competitive pressure.
A harbinger of Cisco’s exit was the early-retirement of Ed Richards, an original developer of the software behind Mediator, a system which Cisco acquired in the acquisition of Richards-Zeta back in 2009.
As Google and Microsoft found in their forays into energy management, Cisco’s market expectations went unmet. The market has been slow to develop, utilities have proven hard customers to develop, and consumers have been all but indifferent to the hype around home energy management software, points out Katie Fehrenbacher at GigaOm.
Cisco’s been riding through a winnowing reorganization in recent quarters. In July, the company shed 9 percent — or 6,500 employees — of its staff, part of a plan to lower costs by $1 billion. And in April, the company killed off its consumer business, including the Flip video camera, which it had bought just two years earlier.
Photo CC-licensed by John Brennan.